Luxe It or Leave It

The luxury market is thriving, but that doesn’t mean it’s the right business model for every retailer.

by Leah Genuario

Located in the heart of The Strip, The Cosmopolitan of Las Vegas is the city’s newest luxury resort. Featuring oversized rooms and luxurious amenities, the resort also boasts an eclectic lineup of retailers. Among the mix is SKINS 6|2 COSMETICS, a high-end beauty boutique.

Although a new venture, the store’s concept harkens back to a sister company previously opened in Europe. The owners were approached at Cosmoprof Bologna by resort executives who were looking for a unique boutique that would pique the interest of its upscale clientele.

SKINS 6|2 COSMETICS offers customers an open and flexible floor plan, unparalleled customer service and niche brands that tell a story. It promises to provide accessible luxuries affordable to the types of consumers who shop at stores like Neiman Marcus.

“Cosmetics are a billion-dollar industry now. People can be so bombarded with information that it can be overwhelming. We keep it simple, and not overwhelming,” says Marie Poelmans, co-founder.

GLOBAL PERSPECTIVE

Statistics show that it’s a good time to be in the business of luxury. Global luxury retailing is expanding by double-digits, according to a November 2011 report from Verdict Research.

While Europe is predicted to remain the largest region for luxury goods consumption until 2015, the Asia Pacific region is quickly encroaching. During 2010, Asia Pacific (excluding Japan) overtook the Americas for the first time as the second-largest luxury goods market. The report also notes that spending on branded luxury goods is forecast to increase by nearly 65% between 2010 and 2015.

LUXURY BRANDS

While the concept of luxury is in demand, it may be harder to put a finger on what luxury means from a tangible perspective. No matter what the product, luxury brands share some common characteristics.

“Prestige customers look for brand recognition or quality products,” explains Jamion Blackwell, founder of Mojo Cosmetics & Design, a branding and design consultancy that also distributes its own boutique beauty brand. “They will look for details and nuances not typically found in most brands. Prestige customers tend to be brand loyal, while mass-market customers tend to bounce from one brand to the next,” he adds.

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There is also an air of exclusivity with a prestige brand. Quality and perceived status are important to customers who shop prestige, but they are also “looking to purchase something that not everyone has,” explains Kelley Lovelace, president of Luxury Retail Consultants.

While some household brand names are immediately connected with luxury, not all luxury brands are multinational enterprises. Poelmans calls it a “new wave of luxury.” She explains, “There are a lot of small brands that are luxury brands because there’s craftsmanship and detail behind it.”

Poelmans takes care to carry beauty brands that are backed by a story, whether it is the story of the product’s craftsmanship or a vignette about the passion that inspired the concept. She believes that luxury products should also be sold through their brand story; not just on the informational facts.

SERVICE SELLS

As with the products on their shelves, retailers looking to capture luxury-loving audiences must offer their consumers more than its mass-market counterparts.

Customer service takes center stage in luxury retail. In the case of SKINS 6|2 COSMETICS, customer service wears many different hats. It involves approaching a customer at the most appropriate time in the purchase process, listening to the customer’s needs, and providing consultations and in-depth information about the brand. Poelmans also greatly believes in the power of demonstration, and readily offers samples and product testing on the store floor.

“We don’t have any incentives for our sales associates on any particular brands. It’s about advising the consumers. That’s really the difference between high-end and mainstream sales floors. We have the luxury and the time to really advise our customers,” says Poelmans.

Lovelace explains the difference between luxury retailers and mass retailers in terms of titles. Mass retailers hire a “clerk” while a luxury retailer needs a “sales professional,” she says. Sales professionals are “trained by the brands they are selling to the consumer; and the transaction is a business transaction, not just scanning a bar code and swiping a credit card,” Lovelace says. “They need to be trained on the products they sell, on selling technique, and should be empowered to make decisions to please their customers.”

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Customers shopping for prestige items expect nothing but the best when it comes to customer service. “Customers look for service, educated salespeople, and knowing that if something goes wrong with the items, they can count on the store to fix or replace it. They also don’t want to worry that next week the item they purchased will be on a special sale,” says Lovelace.

Excellent customer service is not only a priority to a luxury retailer, it is the key to a successful luxury business, says Mark Gelbs, president of On The Marks, a talent placement firm that specializes in the fashion industry, including the luxury fashion world.

According to Gelbs, there are many facets to excellent service. These can include a no-hassle return policy, the ability to effectively deal with problems and offering VIP treatment to customers—which may involve personal shoppers, a phone call to alert the customer of upcoming events, personalized invitations and appropriate follow-up. “If clients can’t feel comfortable, and if they don’t get what they perceive to be personal attention, they’ll go elsewhere,” Gelbs adds.

Finding sales professionals can be a challenge for luxury retailers. Poelmans doesn’t necessarily choose staff that is already familiar with luxury products. Instead, “I look for people who have basic qualities—respectfulness, commitment, loyalty, a hardworking spirit—and want to learn,” she says. She builds on these basic traits by offering a proprietary training program that allows them to in turn educate the consumer.

For those working in the retail store, Gelbs says desirable qualities include poise, a polished appearance and the ability to relate to the type of clientele that walks in the door. For those involved in design and merchandising, a certain taste level must be there. And if someone is involved in sourcing product, both domestic and overseas contacts are very important. “These qualities are important in the luxury business; whereas in other types of companies, it isn’t nearly as important,” says Gelbs.

Top-notch customer service is not the only thing that’s needed for success, however. Luxury buyers have a number of demands from the places they shop. “Prestige buyers want customer service, quality products and knowledgeable staff all wrapped up in a clean, well-organized and comfortable environment that caters to their needs, wants and desires,” says Blackwell.

[Image: Courtesy of Mojo Cosmetics and Design]

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INVENTORY AND FLOOR

Blackwell, whose past projects include work for both large and small prestige brands, suggests a number of strategies that should be adopted by luxury retailers. Practical considerations include an open floor plan, strategic merchandising, strong lighting elements and an inventory with fewer brands than what would be found at a mass retailer. He also suggests coordinating inventory to fit the “theme and demographic of your location.” As prestige buyers look for quality, it is important that retailers catering to the luxury crowd also invest in quality decor. Finally, the space should appeal to all of the senses, and Blackwell suggests adding music that “speaks to the overall theme of the store.”

Sometimes the little things mean big things to those who shop in a luxury establishment. “It’s all in the details,” says Poelmans, who sees tremendous value in finishing a bag off with a bow, adding a welcome mat to the floor, or dressing up the door with balloons to signify a holiday. “Make sure you go the extra mile. Cater to what your client’s needs are and make sure you are creating an environment that’s not overwhelming, and is comfortable. Energize the space. That’s what [luxury] customers look for.”

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IS LUXURY RIGHT FOR YOU?

For business owners who are strategic about earning a reputation as a luxury brand from the start, the risk can pay off. “If you are known as a luxury product to begin with, and you do it well, you are going to do well in any economy. It transcends the economy,” says Gelbs.

But perhaps you are looking at your middle-income clientele and wondering if a switch to high society would be a better financial move. Despite the growth statistics in the luxury business, store owners should not rush into luxury sales, say experts. There are a couple of challenges associated with a transition into the luxury business that might prove insurmountable.

First, Blackwell reminds retailers that “targeting prestige buyers is expensive.” They look for the nuances that are not offered at lower-end stores, whether it’s the decor, the prime location, product selection, customer service, attention to detail or convenience, he adds.

Another, perhaps more daunting challenge is that even your store employees’ best customer service may not be enough “service” for a high-end consumer’s tastes. Blackwell sees a difference between a boutique and a run-of-the-mill store; viewing the latter as predominately filled with merchandise. “Prestige buyers are not taking their beauty regime into their own hands. They pay for the comfort and luxury of having someone else take care of their beauty needs; therefore, they would not have a tendency to frequent beauty supplies,” says Blackwell.

Even if a beauty supply owner invested the money and time necessary to recreate the space’s image and inventory into a luxury atmosphere, it might not work, say experts. “I don’t think that a beauty supply can transition into a luxury boutique. It would be difficult to change the general opinion of the consumers in the area; [seeing] what was once a run-of-the-mill store [turned into] a place to find luxury items and services,” says Blackwell.

Gelbs agrees, saying it would be much harder for a store to transition into a luxury brand if it were not originally considered one. “Generally speaking, a company that is more moderate or middle-of-the-road doesn’t transition well into luxury. You’ve made your name catering to a certain type of clientele. You’ve built your reputation on that type of clientele,” says Gelbs. “If you are trying to break into luxury but you have a different reputation, it’s difficult to be successful. Imagine if Wal-Mart started selling Rolex. High-end customers still wouldn’t shop at Wal-Mart.”

Leah Genuario is a Hawthorne, NJ-based freelance writer. She is the former editor of Beauty Packaging.